Governor vows to take on pension reform to boost credit rating

Monique Garcia, Chicago Tribune reporter

Gov. Pat Quinn on Tuesday sought to ease concerns about a recent downgrade in the state's bond rating that cemented Illinois as the state with the nation's worst credit rating, saying he will push for major pension reforms this year to try to reverse it.

Quinn's comments came just days after Moody's Investors Service downgraded the state's rating from A1 to A2. The change "follows a legislative session in which the state took no steps to implement lasting solutions to its severe pension underfunding or to its chronic bill payment delays," Moody's said in its report.

The Democratic governor noted that Standard & Poor's and Fitch Ratings did not lower their ratings of the state's debt — they rank California as worst in the nation, with Illinois one notch above — but Quinn acknowledged the state's ranking should be improving after last year's income tax increase, not getting downgraded.

"We don't want that, we want to be on the upgrade," Quinn said. "And the best way to do that is to do what I just said: take on the challenge of public pension reform."

The downgrade comes as the state plans to borrow $800 million Wednesday to pay for an ongoing road, school and bridge construction program. That could mean the state will pay higher loan rates, though Quinn's budget office says it won't know the effect of the downgrade until the bonds hit the market.

Pension reform has been debated for years at the Capitol but has come to the forefront as rising worker retirement costs eat up more and more budget dollars each year. Pension costs for the budget year beginning July 1 will be about $6.8 billion, roughly $1 billion more than the current budget year.

In 2010, Quinn signed a measure into law that would reduce benefits for new hires, but some lawmakers say that doesn't go far enough and have been pushing for changes to benefit levels for current employees.

But Quinn and other Democratic leaders have questioned whether that's allowed under the state constitution. And any efforts to reform the pension system will face a tough time in Springfield as lawmakers face re-election and may be unwilling to take politically risky votes until they know their fates in November.

Quinn would not say Tuesday whether he would sign off on changes to current benefit levels, saying he wants to see what ideas are generated by a group he has convened to tackle the pension problem. However, he acknowledged something must be done sooner rather than later.

"I think it's important that all of those who are in the system understand that if the system isn't there, then there's no pensions whatsoever. So folks have to deal with that fundamental economic reality," Quinn said, adding: "Our rendezvous with pension reality will come this year."